More than twenty states and some cities
are considering raising excise taxes on cigarettes, and some have already
done so. In the first quarter of 2001, state cigarette excise taxes ranged
from a low of 2.5 cents per pack in Virginia to $1.11 in New York, and
only three states charged $1 or more. But the state of Washington recently
increased the state’s tax to $1.425, a proposal that won approval of voters
last November. Cigarettes will now sell in Washington for about $5 a pack.
At least six states now charge $1 or more in excise taxes. New York City
is proposing significant increases in city taxes on cigarettes. New York
Mayor Michael Bloomberg has proposed a city tax of $1.50, and the state
of New York recently raised the state tax from $1.11 to $1.50. The retail
price of cigarettes in New York City could be about $7 per pack if the
city tax increase passes. And the federal excise tax was recently increased
by 5 cents to 39 cents.

A recently released Texas study conducted
by the UT Health Science Center partly explains the recent popularity of
cigarette tax increases. The study found that Texans overwhelmingly support
increased tobacco taxes to generate needed state revenues compared to other
types of tax increases. To be fair, cigarette taxes may be the "least-hated"
taxes rather than the "most-loved" ones. But support for necessary taxes
crosses all political party lines. Three out of four Texans said they would
support an increase in taxes on tobacco products if the Legislature were
unable to balance the state’s budget for the following two years. By comparison,
less than 20% would support an increase in sales tax, and about 11% would
support an increase in gasoline taxes.

Public health advocates support increasing
cigarette taxes as a way to reduce smoking, particularly by underage smokers.
One study found that a 10% increase in the retail price of cigarettes results
in a 10% decline in youth smoking. A 10% price increase decreases adult
consumption by 3%-5%. See Effects of Price and Access Laws on Teenage
Smoking Initiation: A National Longidtudinal Analysis, Tauras JA, O'Malley
PM, Johnston LD (April 2001), available at http://www.impacteen.org/access.htm.

The tobacco industry argues that cigarette
excise taxes are regressive, hitting poorer people harder since they are
more likely to smoke. One counter argument is that poor smokers are more
likely to benefit from publicly funded health care programs. Some advocates
of price increases defend the increases on the grounds that only people
who voluntarily choose to smoke bear the increases.

Increasingly, critics are complaining
that states are not raising cigarette taxes to capitalize on the public
health benefits of higher prices, but simply to raise additional revenue
from an easy target. As evidence, they note that few states have devoted
significant amounts from the additional revenues to tobacco prevention
and control efforts. Where states fail to properly fund prevention and
control efforts, this criticism is valid. It is clear that effective prevention
and control efforts require comprehensive programs. Such programs must
include public education, enforcement efforts directed at preventing access
to tobacco products by minors, and support for adult and youth smoking
cessation programs. Higher-priced cigarettes do reduce demand, but only
increasing taxes is not a panacea.